When you are thinking of doing a 1031 exchange, it is important to look at some key items of information. For your relinquished property here are the details to drill-down on and to gather together:
VALUE: what is the value of the relinquished property – what would the estimated gross sales price be?
TRANSACTION COSTS: what are the estimated costs of the sale such as commissions, title closing charges, recording fees and state deed tax – and this will help you guesstimate your net selling price or actual amount realized on a potential sale.
DEBT: What is the remaining debt on the relinquished property – how much do you have in outstanding loans (including any pre-payment penalties)?
BASIS: What is the current adjusted basis of the relinquished property?
FEDERAL AND STATE TAX LIABILITY: How much would you pay in deprecation recapture (max 25%), normal capital gains (max 20%), Net Investment Income Tax (max 3.8%), and State of Minnesota income tax (max 9.85%) – so you know what the tax bill would be on a fully taxable transaction (if you did not conduct a 1031 exchange)?
Once you have the information, you can make a very informed decision and decide what type of replacement property investment is best for your situation.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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